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  5. Q&A of Financial Results for Third Quarter of the Year Ending March 31, 2014

Q&A of Financial Results for Third Quarter of the Year Ending March 31, 2014

The following includes questions and answers at the conference for the financial results for Third Quarter of the Year Ending March 31, 2014.

Precision Equipment Business

Q:What is the sales forecast for ArF immersion scanners this fiscal term?

Sales of ArF immersion scanners in this fiscal year highly account for 4Q period. This is something that could happen every year end, but if the inspection and receipt procedures by customers could not be completed by the end of this fiscal term, the timing of sales recognition will be differed. But most equipment expected sales in the 4Q period has already been shipped to customers so we believe there is no major risk.

Q:What are the future prospects for the market?

Regarding the market in CY2014, we expect sales of IC steppers and scanners (numbers sold) to increase by more than 10% over CY2013. As for the ArF immersion scanner, we anticipate that the market size will be around 90 units in CY2014 though it was 80 units in CY2013.
The LCD steppers and scanners market (numbers sold) is expected to decrease by around 20% from the 73 units sold in CY2013. The main reason for this is that investment in small to medium-sized panels for smartphones and other devices has leveled out for now.

Imaging Products Business

Q:What are the prospects for the interchangeable lens-type digital cameras and interchangeable lenses markets, and the lowering of the company's sales forecast for the entire fiscal year?

Specifying the regions responsible for the lowered sales forecast, there were major drops in China and Europe. The market conditions for digital cameras in the latter half of the fiscal year in both of these markets deteriorated more than we had expected. We had previously anticipated a slump in China in particular, but it has been worse than we forecasted.
Our inventory as of the end of December was healthy condition, but with the current state of the economy and the market, the channel inventory has been substantial, which we expect it will take several months to clear. These are the reasons for the downward adjustment of the market forecast for this fiscal term, and the lowered forecast for the number of units we expect to sell.

Instruments Business

Q:Is there any room for further cost cuts and boosted productivity? Is there a possibility of going into the black next fiscal year?

In the industrial instruments field, we are starting to see synergy with the non-contact 3-D metrology devices of the company we acquired (current Nikon Metrology, Head Office in Belgium). Furthermore, in the field of bioscience we have secured public spending on high-end devices in various areas of research including cancer, brain and stem cells, for which we have gained a strong position in the market. Our profitability is well on the way to making a recovery, and we will be aiming to go into the black next fiscal year.


Q:What can you tell us about cost reductions?

Cost reductions implemented by the Management Measures Committee established last August are progressing smoothly, and we have expected to exceed the target (20 billion yen) for the entire fiscal year. We had initially anticipated that around 70% of our planned cost cuts would begin having an effect in the latter half of the fiscal year, and further as for cost reductions in procurement, the effect is expected to continue into the next fiscal year. Cost cuts centered on the imaging products business this fiscal year, but they will also be implemented in other business units next fiscal year, and they will even include reductions in the cost of development and designing.

Q:Tell us about the extraordinary income of 15 billion yen.

With the construction of a new road, a part of our Yokohama Plant has been targeted for expropriation by the Ministry of Land, Infrastructure, Transport and Tourism. 15 billion yen was paid in compensation as extraordinary income in the 3Q period. This extraordinary income has been already included in our forecast since the beginning of the fiscal year.